In this new article for Field Service News, IDC's Aly Pinder discusses why the future of field service enterprises depends on getting the change in management right.

However, even the field team is finding that they have had to become more nimble, agile, and open to a next normal. In IDC's COVID-19 IMPACT ON IT SPENDING survey, 36.8% of manufacturers stated product and service installation would be converted to a contact-less experience. The ability to service assets, equipment, and products remotely or at least with limited time physically on site is a major shift for many service organizations and field service teams where getting hands on the machine for as long as it takes to fix the issue has been the norm.

As customer expectations evolve to expect contact-less experiences while also receiving quality service, the field service organization will need to transform. However, in an IDC research survey of manufacturers, only 34.0% of sampled organizations stated a strategic approach to change management with senior leadership having invested resources to ensure transformation was successful. The rest of manufacturers had some resources in place for change management but nothing strategic or at an enterprise-wide level. This comes at a time of accelerated digital transformation for many organizations while disruption is impacting the way service is delivered, how customers interact with organizations, and where employees work. These divergent factors, of rapid change with limited strategic communication, can lead to field service teams feeling left out of the future of the business. The field service team, front-line technicians, dispatchers, schedulers, third-party contractors, and partners must be a part of any change from the beginning to ensure expedient success and minimal negative impact to customers. To achieve accelerated digital transformation in field service without the discord, manufacturers and service organizations should consider the following:

• Solicit insight directly from your technicians with regard to gaps in the technology solutions currently used and relation to their productivity. Digital investments for many organizations are implemented from the top down or from the IT team. Not many organizations have the front-line team spearhead technological initiatives. It shouldn’t be a surprise, field technicians by in large are remote and must be primarily focused on completing work orders. Time to test or pilot new technologies isn’t in their job description. However, this fact mustn't lead to the field team being bypassed all together. Field technicians know what tools they need, what knowledge would help them be more productive, and what types of capabilities would enhance their interactions with customers. If field service technicians believe changes in technology or processes area being made with them in mind and with their input, the transformation will result in less friction.
• Educate the field team on the value of digital transformation. Too often, technicians are the last to know about technology hardware and software changes. They are expected to just blindly go along with the latest tools and its inherent value to increased productivity. But this approach can lead to resentment as these technicians have gotten the job done prior to any changes in technology. Also, some enhancements can seem like digital automation just to track technicians more closely to be punitive or restrict creativity in work. Communicating the value of technology changes to productivity, the customer experience, and business goals will provide the field team with buy-in to support initiatives.
• Understand field service team member's desired working environment and interest in digital technology. Not all technicians are the same. Some enjoy going out and dealing directly with customers, and others just want to fix an equipment failure but not have to interact with others. Both profiles are valuable to the field support team. In a constrained talent market, manufacturers and service organizations can’t afford to turn anyone away. By identifying which technicians are willing to work in direct contact with customers and which don’t, service leadership can create dedicated teams that build on individual strengths. Furthermore, with the emergence of a profit- or customer-centric view of field service, many service organizations look to transform the field service job to be less about completing as many jobs in a given day to instead empower technicians to become advisors. This change also is not for all technicians. Assessing which technicians want to work directly with customers to drive value-add experiences and which just want to just solve problems, service leaders can segment the workforce for specific jobs.

Change management is not easy even in the best environments where teams are in constant contact with direct communication with leadership and each other. Field service organizations have an even tougher time as technicians are removed from direct lines of communication with those making decisions, and inherent to their job is a feeling of isolation. As a result, service leadership must approach new digital initiatives and change differently for the field team taking a strategic approach to education, communication, and deployment. Failure to take change management as a serious challenge can result in delayed rollouts, attrition, or degraded service quality.

Further Reading:

• Read more articles by Aly Pinder @ www.fieldservicenews.com/alypinder
• Read more about Digital Transformation @ www.fieldservicenews.com/digital-transformation
• Connect with Aly Pinder on LinkedIn @ www.linkedin.com/aly-pinder-jr
• Find out more about IDC Insights @ www.idc.com
• Read more about Covid-19 in Field Service News @ www.fieldservicenews.com/covid-19
• Follow Aly Pinder on Twitter @ twitter.com/Pinderjr
  
  

In this first excerpt from an in-depth interview on the Field Service News Digital Symposium IDC's Aly Pinder Jr, talks to Kris Oldland about the importance of ensuring our engineers feel protected and valued as we face ongoing concerns over a second wave of lockdowns as we approach the final quarter of 2020...

2020 has been the most testing of years. We have had to rethink our approach to almost everything as a result of the COVID-19 pandemic and the lockdowns that have been ensuing for over six months now. While some parts of the world have reopened such as Germany, others such as Sweden never really closing down, others such as the UK and Australia remain on a precipice, waiting with various regional lockdowns and the threat of the return of nationwide lockdowns hanging in the air like a dark, ominous cloud.

We never expected to it to take quite so long to 'flatten the curve', back in April we were already planning on what the recovery might look like yet, as we approach the final quarter of 2020 we are still holding meaningful discussions about how we operate within such uncertain parameters.

Back in April this year, IDC's Aly Pinder Jr joined Kris Oldland, Editor-in-Chief, Field Service News, for a discussion that rings as pertinent today as then, perhaps even more so. The discussion centred around the understanding the human equation to our engineers. As Pinder commented, "these are not just resources we are sending out, these are people."

At the time of the interview, it was a conversation against a backdrop of frantic scrambling as companies all across our industry adapted to the unprecedented lockdowns, and a radical rethinking of how field service operations could be delivered was created on the fly. With much of that thinking now complete, with more robust processes in place, innovative technologies that allow for remote service delivery in embraced, we are for sure much better placed to cope with further lockdowns as international governments react to the potential threat of a 'second wave.'

"I think having a daily check in the same way that we do in our white collar jobs, is important..."

- Aly Pinder Jr, IDC

Yet Pinder's thoughts from back in April still resonate powerfully. While those of us in office-based roles are now well transitioned into the routine of home working. Our engineers in many cases will still need to be out in the world, working, keeping essential services moving. How do we ensure that they feel protected and valued at such a time?

"I think the first thing is communication," Pinder explained.

"We don't all have the most appreciation for real time collaboration as we do in a more white collar scenario. For our technicians, oftentimes the environment they're working in is they have an application or a laptop that they open up and they walk through a checklist of items to close out a work order. I think we're getting to the point where we understand the technology that's out there to provide us with real time collaborative tools," he continues.

"The opportunity is to go in whatever way in which your technicians are willing to interact with you, whether it be the phone or a newsletter that provides them with a daily update or an email that you check-in and understand, this is what we hope for us to be able to deliver today and asl is there anything that's going to keep you from attaining those goals? And do that on somewhat of a daily perspective.

"I think having a daily check in the same way that we do in our white collar jobs, is important. obviously, for technician base is ten thousand then it is going to be a little more difficult. But, I think putting forth the expectation and figuring out what is stopping you from getting there, I think is a good first step. If you don't have a full, video collaborative real time tools that we're starting to see more and more service organizations have, it's still just a phone call or still just an email, it's still just a way to communicate, to get a better understanding.

"This also allows companies to work with their engineers to put them on a schedule that actually opens up more productivity for the organization"

- Aly Pinder Jr, IDC

This is good practical advice that many field service organizations will adhere to. However, Pinder is also a strong advocate of ensuring that the engineer understands that they are valued in their role as more than just a pair of hands as well. This means understanding how the current situation is impacting them beyond just their ability to do the job at hand.

As Pinder added "… and then opening up a channel that says every other day, 'I want you guys to let me know how are your home lives being impacted? Is there something where your work schedule may not be what it's always been can we readjust from a scheduling perspective what hours you're able to work based off of your own concerns.' Here in the US, it could be that they're struggling for daycare or, other support systems for their family. Maybe their working hours should be XYZ as opposed to what the regular nine to five?

"This also allows companies to work with their engineers to put them on a schedule that actually opens up more productivity for the organization because they can move things around from a scheduling perspective that also allows us to meet our customer's requirements to not have so many people on site at any given time."

Further Reading: 

• Read more about the impact of Covid-19 on the Field Service sector @ https://www.fieldservicenews.com/en-gb/covid-19
• Read our back catalogue of articles exclusively written for Field Service News by Aly Pinder Jr @ https://www.fieldservicenews.com/blog/author/aly-pinder
• Read more about managing the mobile workforce @ https://www.fieldservicenews.com/blog/tag/managing-the-mobile-workforce
• Connect with Aly Pinder Jr on LinkedIN @ https://www.linkedin.com/in/aly-pinder-jr-2a48a92
• Follow Aly Pinder Jr on twitter @ https://twitter.com/pinderjr
• Read more about Aly's work with IDC @ https://www.idc.com/getdoc.jsp?containerId=PRF005055

In the final feature in our series of extracts from an excellent white paper published by IDC and sponsored by IFS, we will explore the IDC Servitization Barometer which is designed to allow field service organisations to chart their path to new revenue streams.

In part one we looked at the rapid and wide reaching change that is being faced by manufacturers in all sectors, in all regions. In part two we looked further at IDC's Servitization Maturity Framework. Now in part three see how the broad maturity of the sector against this model. In part three see how the broad maturity of the sector against this model. Now in the final feature of the series we start to see best practices emerging... 

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full white paper on the link below. 

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Sponsored by:

Data usage note: By accessing this content you consent to the contact details submitted when you registered as a subscriber to fieldservicenews.com to be shared with the listed sponsor of this premium content, IFS who may contact you for legitimate business reasons to discuss the content of this content. 

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Service operations capabilities are at the heart of successful transformations. IDC believes that much of the focus in recent years has been on providing staff with good tools to deliver basic services, rather than creating new services and updating the flows to support those.

 

One example is mobile access. The first chart in Figure 9 shows how the spread in choice between good performers (Stage 3 and 4) and subpar performers (Stage 1 and 2) is very thin. Most companies across all sizes have managed to provide their field workers with decent capabilities, even if only providing augmented features.

 

 

On the other hand, innovation on service portfolio is overall a far more immature topic. Approximately half of the companies surveyed offer maintenance contracts at best. Another 30% augment this with financing, which means barely 20% are focused on innovating services. On top of that, there is a very large rift in regard to service creation between good performers (Stage 3 and 4) and subpar performers (Stage 1 and 2), as shown in the second chart in Figure 10. 70% of the slow performers have haphazard approaches to service creation, the complete reverse of what Borderless and Joined-Up enterprises do.

Another key discerning element in service operations excellence is the ability to have a two-way process and data flows between service management and back-office functions. 40% of the organizations surveyed have zero interlink of key systems (ERP, FSM, supply chain), suggesting a fully fragmented value chain, and just 15% have two-way links, meaning manual or sensor-based input from field service processes triggers information updates and actions in ERP and supply chain systems.

The final key success factor is related to skillsets, both in the field worker group and in the leadership team.

• Field workers need to be not only apt at using and understanding technology, but also enthusiastic about expanding their knowledge and abilities at a much faster pace. Annual training and “experience” are not enough when product updates happen monthly over-the-air and digital applications are part of the portfolio.
• Lack of know-how or internal capabilities to run a services business is ranked as the number one hurdle to servitization. IDC believes it is very hard for companies in production-oriented industries to hire executives that are capable of innovating on the service side of the house.

Eyes on the Prize — What Borderless Enterprises Teach Us

Assessing the status quo is important. But what should companies aim for? What are the benefits of becoming a Borderless enterprise and the traits defining one? The in-depth Barometer research allows us to start answering those questions:

• Companies should start investing in a long-term service vision. 90% of the best performing companies expect business model revolutions in three years with pay-per-use, outcome-based services, and ecosystem monetization all playing a role. This compares to 15% in the sample average. They also already generate 12% of their revenue from services, versus an 8% average.
• Front-end capabilities must be proactively built. The ability to immediately route calls from the contact center to engineering support is a strong indicator of leading organizations. Similarly, Borderless companies have often managed to build fully automated troubleshooting capabilities for end customers. Data is automatically synced from in-field products to the cloud, issues are logged, and solutions proactively offered.
• Strategic partnerships are critical drivers to success in servitization. Becoming a Borderless organization requires an ecosystem approach to the development of data-driven digital services. Organizations at the most advanced stage of servitization maturity are monetizing co-creation initiatives to enrich their services portfolio by leveraging the capabilities of partners in adjacent industries.

 

Figure 11 (below) shows other traits as well as the immediate benefits of being a Borderless enterprise. Much higher profitability and above-average revenue growth are both enjoyed by these types of companies.

 

 

While it is true that real Borderless enterprises are relatively hard to come by, it is imperative that businesses look to them as examples and start acting now. At the Joined-Up stage (Stage 3), roughly one-third of companies in the market are within striking distance. IDC believes many members of this group are very likely to “up-rank” in a two to three-year horizon. Remaining in the bottom ranks would mean becoming pigeonholed in a low-margin, low-growth mode for the foreseeable future.

 

Getting the Low-Hanging Fruit

IDC maintains that some low-hanging fruits can be achieved even by moving up from the lower stages of servitization. Figure 12 provides a summary of the potential gains and likely roadblocks on the path towards a Borderless enterprise. While there are multiple ways to move along the servitization journey, some common patterns start to appear. In particular:

• Strong profitability and sustained revenue acceleration are visible from Stage 3 onwards. As almost 50% of buyers sit in Stage 2, it is recommended that they build expectations around those KPIs as they connect their whole value chain. Failing KPIs would be a sign that the journey is not progressing
• The last, trickiest roadblock is linked to decision making. Transformation towards a service-first business model will eventually pass through the leadership. In the Barometer survey, 85% of respondents said they were part of a decision-making group that typically involves Head of Products, Head of Services, and often Head of Operations, plus the IT side of the organization. Building the right “dream team” dynamics will be crucial to ensure success in the final stages.

 

IDC Advice to End Buyers in Production-Oriented Industries

On a backdrop of subsiding demand for traditional products, IDC sees a clear trend emerging towards augmenting products with services, and ultimately transforming traditional physical supply chains into open ecosystem value chains. This transformation process is called servitization, and it is to be understood as a subset to digital initiatives.

While only a few have achieved the servitization “nirvana” of the Borderless enterprise, more than a third of companies globally are already Joined-Up, poised to get within striking distance of that vision soon. Those fast movers already have proof-points to show for it, including:

• Service revenues that are on average one-third larger than their peers’ as a proportion of total revenue
• 5X more chance of accelerating top line growth above 5% yearly
• Much greater likelihood of showing profitability improvements thanks to DX initiatives

IDC recommends every company in all physical value chains get moving as soon as possible. Laggards are likely to find themselves pigeonholed in low-profit niches within the next two years if they fail to do so. Based on our research, IDC recommends the following strategic and tactical best practices.

 

Strategic Best Practices

1. Work with the leadership to build a “dream team” involving Head of Products, Head of Services, Head of Operations and CIO/CDO that aligns early on strategic objectives for servitization. This transformation process will impact all those departments (and more). While initial attempts can work without coordination, data shows that internal conflicts are the biggest obstacle in Stage 3 and beyond.
2. Be proactive in customer-centricity. No servitization can happen without a strong, ultra-connected customer engagement function. Even good performers appear to struggle to go beyond basic tools and processes. Combining customer metrics with operational scores and above all being ready to invest in staff and technology from day one is highly recommended.
3. Set key performance indicators and make them public. IDC research shows that revenue growth accelerates when crossing the chasm to servitization. Financials can be volatile, though, especially on a quarterly basis and even more so when business model change hits. Measuring other items such as the percentage of service revenue in each division, field service worker satisfaction, and net promoter score is recommended to keep a steady pace and not lose sight of the end goals.

Tactical Best Practices

1. Put together a small “Services Tiger Team” as soon as possible. The team should be comprised of mid-senior members across the “dream team” divisions, including IT. Its key objectives should be to review and classify existing services, related processes, and profitability (Phase 1) and to ideate new offerings to test in the market within twelve months (Phase 2). For the sake of iteration, multi-year launches are not recommended.
2. Perform a complete review of your data flows end-to-end. To test how well connected your backoffice and front-desk are, first pick your best-selling product. Then analyze whether contact center and field service agents have consistent information about parts availability, whether they can directly augment or modify information in back-office systems, whether potential IoT or third-party component supplier data is consistent, etc. This will quickly highlight bottlenecks in process and information.
3. 3. Kill all of your IoT projects that don’t generate events in either service management or ERP/ supply chain systems. Focusing efforts on actionable data is a must. Chances are you already have IoT data collection from end products or the supply chain in place — often without a production use case. IDC recommends ruthlessly eliminating those to make space for IoT projects subordinated to the launch of new service offerings.

 

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Further Reading:

• Read more about Servitization and Advanced Services @ www.fieldservicenews.com/blog/tag/servitization-and-advanced-services
• Read more about Digital Transformation @ www.fieldservicenews.com/blog/tag/digital-transformation
• Read exclusive FSN features from IDC's Aly Pinder @ www.fieldservicenews.com/blog/author/aly-pinder
• Read FSN Features and News from the IFS team @ www.fieldservicenews.com/hs-search-results?term=IFS
• Find out more about the solutions IFS offer to help field service companies @ www.ifs.com
• Follow IFS on Twitter @ twitter.com/ifsuk

We continue our series of extracts from an excellent white paper published by IDC and sponsored by IFS, we will explore the IDC Servitization Barometer which is designed to allow field service organisations to chart their path to new revenue streams.

In part one we looked at the rapid and wide reaching change that is being faced by manufacturers in all sectors, in all regions. In part two we looked further at IDC's Servitization Maturity Framework. Now in part three see how the broad maturity of the sector against this model. 

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full white paper on the link below. 

---

Sponsored by:

Data usage note: By accessing this content you consent to the contact details submitted when you registered as a subscriber to fieldservicenews.com to be shared with the listed sponsor of this premium content, IFS who may contact you for legitimate business reasons to discuss the content of this content. 

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First Results From the Servitization Barometer

Now that we have established the requirements and benefits associated with servitization, it’s time to provide an overview of the current maturity status in this area. How far along in adoption and understanding are enterprises out there? Based on the Barometer results (Figure 5 below), IDC can confidently say that we are at the beginning of the journey.

 

Based on IDC’s benchmark, 50% of organizations find themselves at Stage 2 (Side-Car), and another 14% are stuck in the nightmare of Splintered operations (Stage 1). A third of companies interviewed have started joining up their value chains (Stage 3), and less than 5% have reached “Nirvana” (Stage 4) and already opened up their service platforms to the ecosystem.

 

These results are broadly in line with how those organizations talk about their current status:

 

• The wave is coming. The clear majority (91%) of organizations are either planning or already rolling out servitization initiatives. However, only 9% are blending most or all their product portfolio with advanced services.
• Services will trigger the wave. Services generated on average 8% of the total revenue among physical value chain companies interviewed. This was slightly higher at 11% for companies with >$1B annual revenue. As with servitization plans, expectations are tilting to growth. On average, organizations expected services to account for 16% of total revenue in three years. This was a global trend consistent across all geographies. Organizations at more advanced stages of the servitization journey expect faster growth in that direction (see Figure 6 below).

• Revenue growth will depend on services. 38% of the organizations surveyed reported zero or negative revenue growth for the twelve months ending in July 2019. Another 53% were growing below 4% yearly and less than one company out of ten more than 5% yearly. This means even small improvements in services contribution can do wonders for growth trajectory. In fact, according to this Barometer, organizations that are more advanced in their servitization journey are already perceiving significantly higher revenue growth than their peers (see Figure 7 below).

• Best performers leverage data and strategic partnerships. The barometer reveals that organizations in Stages 3 and 4 are going beyond the traditional repair and maintenance services, as they are striving to grasp the new revenue streams linked to data-driven digital services that they deliver either by themselves or in collaboration with partners in adjacent industries (see Figure 8 below).

A Deeper Look at Servitization Maturity

Servitization maturity is not equally spread across all types of companies. Nor is maturity equal across dimensions. The key findings on how IDC-assessed readiness changed in the organizations we talked to are:

• Large companies are moving faster. Among organizations with less than $500 million in revenue, only 10% reached Stage 3 or 4. This contrasts with more than 50% in companies with $500–$1 billion annual revenue and more than 80% in companies with >$1 billion revenue.
• Servitization is a cross-vertical topic. Sector of operation did not appear to influence the overall servitization speed, a sign that the topic is relevant in all physical value chains.
• Some differences exist at the geographical level. Controlling for company size, organizations based in the UK, the US, and France appear slightly more advanced than counterparts in the Nordics and Germany. The first three countries reported between 40% and 50% of companies at Stage 3 or 4, versus approximately 25% in the latter two.

Digital and Customer Engagement are Areas of Concern

Key learnings gained by looking at readiness levels by dimension (Figure 5) include the following:

• Intelligent IoT and service operations maturity track very closely to overall readiness. Service operation maturity is quintessential to servitization, so no big surprise here (see section below). However, IDC detected slightly higher than expected developments in the IoT space. Survey results showed that significant or complete portions of portfolio are already IoT-connected in 60% of organizations. However, data showed that the rarer ability to connect supply chain and production facilities was a much more important indicator of servitization maturity

• Backoffice is ahead of other areas, but integration with the front-end is missing. The base is decent: more than 85% of the sample have already standardized their processes. Half of them did so in a siloed fashion, half integrating multiple departments. Acceptance of change is the keyword for more than 70% organizations — a sign that enthusiasm is lacking. The real gap, however, is integration of the back-office and field service systems. Just 10% reported full work order integration and as many as 45% confessed to having only manual data integration, which really means no integration at all.
• Customer engagement mindset is still far away. There is a lot of work to do around customercentricity, as only 50% of organizations are set up properly with either Net Promoter Score (NPS) alone or combined with advanced techniques. 40% collect anecdotal customer feedback and 10% measure only operational metrics. This reverberates in lacking technology investments on customer experience. 55% of companies reported phone, email, or basic Web portals as the only channels. IDC maintains that this is directly linked to the hit-and-miss DX attitude of the past few years, especially in midmarket companies.

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Further Reading:

• • Read more about Servitization and Advanced Services @ www.fieldservicenews.com/blog/tag/servitization-and-advanced-services
  • Read more about Digital Transformation @ www.fieldservicenews.com/blog/tag/digital-transformation
  • Read exclusive FSN features from IDC's Aly Pinder @ www.fieldservicenews.com/blog/author/aly-pinder
  • Read FSN Features and News from the IFS team @ www.fieldservicenews.com/hs-search-results?term=IFS
  • Find out more about the solutions IFS offer to help field service companies @ www.ifs.com
  • Follow IFS on Twitter @ twitter.com/ifsuk

In a new series of extracts from an excellent white paper published by IDC and sponsored by IFS, we will explore the IDC Servitization Barometer which is designed to allow field service organisations to chart their path to new revenue streams. In part one we looked at the rapid and wide reaching change that is being faced by manufacturers in all sectors, in all regions. Now in part two we look further at IDC's Servitization Maturity Framework

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full white paper on the link below. 

---

Sponsored by:

Data usage note: By accessing this content you consent to the contact details submitted when you registered as a subscriber to fieldservicenews.com to be shared with the listed sponsor of this premium content, IFS who may contact you for legitimate business reasons to discuss the content of this content. 

---

 

IDC strongly believes servitization will make or break digital transformation initiatives in physical value chains. As the concept is still relatively new to many organizations, it needs to be articulated and clarified.

To help organizations understand where they currently are on this journey and, more importantly, how to proceed to the next level, IDC has built the IDC Servitization Maturity Framework, identifying key dimensions and stages defining an organization’s readiness. In connection to this effort, IDC and IFS have cooperated for this first edition of the IDC Servitization Barometer, a data-based assessment of where companies around the globe find themselves in the servitization journey.

The barometer is fed by an IFS-sponsored survey carried out in July 2019, touching 420 companies active in the physical supply chain world. In this section, we will provide an overview of the tenets of the Maturity Framework, before deep diving into the results of the Barometer. For more detailed information on the survey, including demographics and background, please refer to the Methodology appendix. IDC believes an organization’s status as regards to servitization is defined by the five equally important dimensions described in Figure 3 below.

 

IDC believes the servitization journey can be summarized in four key stages, as shown in Figure 4.

The four stages can be described as follows:

1. Splintered. The organization struggles under a myriad of silos that lead to disjointed, manual processes. Legacy, fragmented ERP environments provide little or no visibility on operational performance. The business model is on pure product, with challenges to profitability.

2. Side-car. The organization has standardized the two chunks of the value chain (back-office and front-desk) but keeps them separated. The keyword in the company is efficiency and few add-on services are delivered. Field service is based on basic mobile capabilities and IoT stacks are at proof-of-concept stage. Growing the business is hard.
3. Joined-Up. Front-office and back-office flows have been integrated in both directions and leverage the power of advanced technologies such as IoT to feed the core systems with real-time data. In some cases, Edge capabilities bring coordinated autonomy to local sites. A suite of digital services is fully available, and business model enhancements such as pay-as-you-use and outcome-based contracts are being explored.
4. Borderless. Processes start and end outside the organization and operations and technology enable different elements of the value chain to connect. Co-creation, data-sharing and collaboration with customers, suppliers, partners from other sectors and in some cases even competitors are part and parcel of the business model.

 

Servitization - A Real Example

A few years ago, a global healthcare manufacturer was struggling with data silos and a balkanized departmental setup (Stage 1). It integrated all the systems and processes in the purchase-to-stock part of the chain and achieved a much leaner back end, allowing better forecasts. Early discussions on modernizing the support and customer front end were held as it reached Stage 2. This is where the company is now. Margins are improving, but the ability to grow is not.

 

The company decided to explore a new business model towards delivering its medical instruments to operating theater managers on a pay-per-use basis, enabling healthcare professionals to access new innovations without massive upfront investment. The objective of this manufacturer is to generate a competitive differentiation against low cost competitors.

 

New technologies and service ideas are needed to get to Stage 3. To achieve that, IoT connectivity at customer, field service management software allowing rich data capture and machine learning algorithms that shape both supply flow and product design based on customer data are needed. This will drive new revenue streams from after-sales service and parts, on top of pay-as-you-go capabilities.

 

Alongside this, the advantages of the business model change become visible to customers. Since losing patients on the operating table due to a lack of materials is a not acceptable, hospitals lean towards very large safety stocks, which generates high inventory costs that are absorbed by patients. By creating an intelligent data flow on instrument utilization, the manufacturer can ultimately make healthcare more accessible to patients.

 

The long-term horizon begins to appear. In Stage 4, the company will strive to create an adaptative digital workflow in which real-time data generated interlinked with suppliers of raw materials, sterilization companies, hospitals, and patients will drive higher levels of success in the operations room.

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Further Reading:

• Read more about Servitization and Advanced Services @ www.fieldservicenews.com/blog/tag/servitization-and-advanced-services
• Read more about Digital Transformation @ www.fieldservicenews.com/blog/tag/digital-transformation
• Read exclusive FSN features from IDC's Aly Pinder @ www.fieldservicenews.com/blog/author/aly-pinder
• Read FSN Features and News from the IFS team @ www.fieldservicenews.com/hs-search-results?term=IFS
• Find out more about the solutions IFS offer to help field service companies @ www.ifs.com
• Follow IFS on Twitter @ twitter.com/ifsuk

In a new series of extracts from an excellent white paper published by IDC and sponsored by IFS, we will explore the IDC Servitization Barometer which is designed to allow field service organisations to chart their path to new revenue streams. In part one we look at the rapid and wide reaching change that is being faced by manufacturers in all sectors, in all regions...

Would You Like to Know More? www.fieldservicenews.com subscribers can access the full white paper on the link below. 

---

Sponsored by:

Data usage note: By accessing this content you consent to the contact details submitted when you registered as a subscriber to fieldservicenews.com to be shared with the listed sponsor of this premium content, IFS who may contact you for legitimate business reasons to discuss the content of this content. 

---

 

Production-oriented industries anchored in physical value chains are undergoing a process of deep transformation. Business leaders must find new ways to adapt to rapidly changing customer expectations and volatile market conditions. Rethinking the approach to ideation, innovation, and new product and service development is critical to maintaining top- and bottom-line growth.

Digital transformation initiatives are being rolled out with the end goal of making enterprises “Borderless.” This means the powering of a digital network that integrates internal and external silos to deliver more value to the ecosystem, including employees, customers, suppliers, and partners.

IDC research (see figure 1 below) indicates that digital organizations in production-oriented industries are benefitting from strong growth in terms of revenue and profit. Non-digital organizations struggle.

 

As digital transformation evolves from a cluster of one-off projects to the generation of new business models, business leaders are required to deliver the associated business outcomes from digital investments. In fact, in a recent IDC survey 65% of CEOs stated that they were under considerable pressure to craft and execute a successful digital transformation strategy that enables financial growth in their organizations.

In production-oriented industries, success is dependent on the ability to bring a much stronger service value proposition to play. Servitization is therefore turning into a top agenda item in this sector, with 82% of firms actively exploring or moving to servitize their businesses. The transition towards servitization in these industries is potentially motivated by the fact that the respondents expect the average proportion of annual revenue generated from services versus products to double from 8% in 2019 to 16% in 2022.

IDC describes servitization as the process whereby organizations with physical value chains enhance their products with — and ultimately package them within — advanced services such as digital applications and payment models based on consumption or outcome. According to IDC’s research, there is a strong correlation between servitization maturity and revenue growth. All organizations in the most advanced stage of servitization have reported growth in the top line in the past year, often over 5%. On the other hand, the revenues from 88% of organizations in the earliest stage of servitization maturity have either decreased or stayed the same in the past 12 months.

 

"Servitization is a journey and its end stage is the creation of an end-to-end value chain..."

 

In most organizations, servitization is a critical element of the overall digital transformation. It involves a transformation of the core systems, leveraging emerging technologies such as IoT and machine learning, which in turn enable organizations to access real-time data from the ecosystem and transform it into actionable insights.

Servitization is a journey and its end stage is the creation of an end-to-end value chain. This can only be enabled by driving interoperability at the application level, where the ERP systems underpinning the supply chain are seamlessly connected to the applications enabling field service and contact center agents, as well as the sensors collecting data from deployed products. The outcome is a continuous flow of relevant information across front-office and back-office to increase operational performance and new revenue streams based on data-driven services. Figure 2 (below) illustrates some of the benefits that servitization could deliver to production-oriented organizations and their end customers.

 

Examples of companies heading towards servitization include:

• An Israeli-based industrial valves manufacturer embedded IoT modules in its products, allowing it to charge customers based on volumes of liquid processed. The customer can program the valves for remote manual operation or set a machine-learning algorithm to do that. This increases efficiency in the industrial operations.
• A forklift maker connected one of its products to a cloud backend with GPS tracking, offering its logistic customers remote maintenance services and a fleet management service to locate its forklifts.
• A global defense and security provider offered aircraft fleet maintenance and repair services. In order to ensure high availability of the equipment for its customers, this organization has linked the systems that underpin the maintenance and repair cycle to its enterprise resource planning (ERP) applications. The outcome is the delivery of an effective fleet readiness management to customers and the generation of new revenue streams coming from more after-sales services and improved customer satisfaction.

Based on discussions with companies in the sectors impacted, IDC believes changes in business models are part and parcel of servitization. These can be played out in three ways:

• Augmentation of product-based revenue with additional service revenue going beyond traditional services (maintenance, break-fix etc.) to include data-driven digital services (e.g., Fleet management service above)
• Partial or complete switch from upfront sales towards consumption or outcome-based models (e.g., “pay-per-liquid volume processed”)
• Monetization of proprietary data through licensing to third party (e.g., a car manufacturer selling access to driving behavior data to an insurer)

While complexity and impact on overall organization changes between the three approaches, IDC believes that all these new approaches to business models signal that a servitization journey is on the way and positive effects for the top and bottom line are a consequence of those.

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Further Reading:

• Read more about Servitization and Advanced Services @ www.fieldservicenews.com/blog/tag/servitization-and-advanced-services
• Read more about Digital Transformation @ www.fieldservicenews.com/blog/tag/digital-transformation
• Read exclusive FSN features from IDC's Aly Pinder @ www.fieldservicenews.com/blog/author/aly-pinder
• Read FSN Features and News from the IFS team @ www.fieldservicenews.com/hs-search-results?term=IFS
• Find out more about the solutions IFS offer to help field service companies @ www.ifs.com
• Follow IFS on Twitter @ twitter.com/ifsuk

New research charting the servitization journey of companies shows a significant gap in progress between firms with only 3% surveyed at a stage of maturity.

The study, instigated by IFS and extrapolated by global analyst firm IDC, surveyed 420 global manufacturing companies, active across the physical value chain, who were at varying stages of their servitization strategy.

From the data, IDC developed a Servitization Maturity Framework (The IDC Servitization Barometer) comprising four levels that segments companies based on their level of adoption.

The Four Stages of Servitization Adoption

The ‘Splintered’ stage, and the lowest level, represented 14% of firms.Typically these companies operated in silos, running dis-jointed, manual processes and fragmented business systems producing little or no visibility in performance.

The next stage, ‘Side-Car’, was the largest representation of companies (49%). Here firms had standardised their back and front office operations but were yet to integrate the two.

‘Joined-up’ companies have integrated front and back offices in both directions and have progressed to leverage technologies such as IoT to feed core systems with real data. This segment was represented by 39% of firms surveyed.

Only 3% of canvassed firms operating at the fourth ‘Borderless’ stage (or “Servitization Nirvana,” the report says). These companies have processes that start and end outside of the organisation with operations and technology facilitating the connection between different elements of the value chain.

However, IDC said those firms at the ‘Joined-Up’ stage, who were exhibiting some, but not all elements of a servitization strategy, for example an integrated back and front office and the use of IoT, were still able to show significant financial proof-points, with service revenues - on average - one third larger than their peers’ as a proportion of total revenue.

“Organisations that bundled projects with services or offered their capabilities in a consumption-mode are already enjoying competitive advantages,” Phil Carter, Chief Analyst at IDC Europe and one of the authors of the report says. “Manufacturers engaging in this transformation should demand applications that are natively connected across the full value chain, from the shop floor to customer support and service.”

IFS carried out the survey in July 2019 and the President of the firm’s Service Management Business Unit Marne Martin said IDC’s maturity framework identified the key barriers firms are facing in their quest for full servitization adoption. “The IDC Servitization Barometer lays out the key hurdles facing many manufacturing organisations,” she says, “including the lack of internal know-how and the perrenial problem of running legacy, disjointed business systems.”

Further Reading: 

• Read the full report IDC Sertvization Barrier - Charting your Path to New Revenue Streams here.
• Read more about customer servitization in field service @ www.fieldservicenews.com/servitization
• Find out more about IFS here.
• Find out more about IDC here. 

The eternal hunt for field service excellence has recently been bolstered by the rapid rise of Artificial Intelligence as a major tool in the arsenal of the field service organisation writes Aly Pinder...

The emergence of the Internet of Things (IoT) has led to the next big challenge for service organizations and manufacturers. How can wemake sense of the data we now have access to? From executives to the front-line field service technician, the ability to turn data into actionable insights will become the measuring stick for sustained success.

Leverage

To take this leap from data points to insights, organizations are ramping up quickly to leverage artificial intelligence (AI) to ensure volumes data (flow, sensor, vibration, temperature, or other data) can be mined quickly, accurately, and autonomously. When asked in a recent IDC survey, manufacturers listed Big Data and AI as a 4.06-level of importance (on a 1-5 scale, 1-not at all important,5-very important) regarding technologies integral to their service innovation journey.

The increase in importance should come as little shock to most as technology become ubiquitous in our daily lives, however what is interesting is the impact AI is having on service broadly and field service specifically.

As organizations evolve service business models to be less reactive and more proactive or predictive, the ability to leverage real-time data across a complex network of inputs is becoming critical for this transition.

Being reactive or break / fix merely requires a customer or an operator to call the service desk and report an issue. But in order to truly be predictive or prescriptive with service prior to a failure, organizations must leverage performance data to allocate resources, trigger a service event, and schedule the service to be delivered.

Organizations are looking to AI to explore field service excellence in some of the following ways:

• Better service planning and execution – How often have we talked about the “rights” of field service; right part, right tech, right skills, right time, right resolution. As much as we’ve commented on this and attempted to reach this utopia, many organizations still miss. AI connects the dots between each of the inputs across field service execution to provide the intelligence necessary to make the correct decisions, each time.
  
  
• Customer experience optimization – Even at a global scale, manufacturers and service organizations are finding they need to personalize service experiences for their customers. AI is enabling organizations to segment customers and deliver the level of support desired. Not every customer wants the closest technician, some just want to see the tech they’ve built a relationship with over the years. AI can and should be used to identify customer needs along with how best to resolve an issue. Should you resolve an issue remotely, or send a field service technician, or notify the customer directly with a customer support agent to walk them through the fix?
  
  
• Self-healing and suggestive preventative maintenance – As service organizations embrace servitization or product as a service models, they will need to deliver uptime and outcomes. Analyzing asset performance data and anomalies at scale provides the bridge to these new autonomous field service business models. But AI also provides the reporting capability to support the dashboards and details which will validate these premium services. Without capturing data points and rationalizing the service being delivered, customers may not understand why they are paying for service when they don’t actually see a failure occur.
  
  

I look forward to seeing how field service organizations take advantage of AI to take this leap and meet customer expectations for an enhanced service experience.

IDC’s Aly Pinder explores one of the most crucial conundrums facing field service organisations today - how to ensure knowledge transfer is seamless across the organisation...

At some point we will finally reach the moment when all the seasoned field service engineers retire. I know, we have been foretelling this for years and in my case more than a decade. Despite this seemingly ever-present anxiety around replacing a retiring field workforce, many manufacturers and service organizations still list knowledge loss as a top challenge yet to be successfully addressed.

IDC Manufacturing Insights’ 2019 Product and Service Innovation Survey highlighted one of the top drivers for manufacturer’s service lifecycle management efforts is a need to capture and make accessible service knowledge and best practices. Building a culture of shared intelligence and accessibility of service knowledge, nearly half of organizations (42.7%) sampled in this study plan to leverage mobile devices for the purpose of increased collaboration amongst technicians.

These investments and prioritization demonstrate how much risk is inherent with having an entire workforce which often goes out on its own for an extended period of time, rarely coming back into a centralized location, and is one of the closest resources interacting directly with customers. The scary part is the value technicians to the customer experience is becoming more not less critical for manufacturers and service organizations.

In advance of losing field workers, I recommend you consider a few things:

• Identify your workforce that is planning to retire in the near future. Do you survey your technicians, at least annually, to ask them when they plan to retire? Assuming your technicians will retire at the retirement age of your respective country is quite risky. Reaching out to your technicians to identify when they plan to retire allows the organization to identify the level and urgency of the risk, plan for the loss, and even proactively strategize to either retain or hire more aggressively in advance of the loss.
• Get creative with technician retention. Organizations should establish a program that enables technicians to be able to work as a centralized expert. This is where gamification and incentives can be used to create a bench of technicians that are willing to stay with the company, accelerate the rate of capturing best practices, and recognize the value of the decades of experience which is held in the brains of the technician. Organizations would be wise to establish a role which based on identify qualifications or attainment of a certain expertise level can extend the viability of a seasoned technician staying on the team.
• Show your newer workforce a career path which is rewarding and valued. Many organizations struggle with creating tangible and exciting career paths for the workforce. Career paths are difficult to detail as there  are so many variables, both for the employee and the organization. This is an even bigger challenge with a largely remote workforce at many service organizations. However, the ability to communicate a future for the field technician is a critical step in addressing the workforce skills gap which should go hand in hand with trying to retain more seasoned technicians. This practice will help create a culture that values the service technician experience and show the workforce where they will fit in the broader strategy of the organization.

Talking about the retiring field force mustn’t be the end of the story that we tell each other, organizations must act now. Technology is one of the ways to capture and make accessible service knowledge, but manufacturers and service organizations need to identify their respective risk and build a strategy around addressing the loss of critical service knowledge.

Collaboration and shared purpose will enable organizations to get in front of this pending wave of retiring workers.